Getting to know the Value Chain Analysis
What Value Chain Analysis can do for you
There is much discussion these days about value chain analysis (VCA). The concept of a VCA has been around for decades, but only recently has its use in the tax world become more commonplace. Although the Organisation for Economic Co-operation and Development (OECD) has not explicitly referenced a VCA, the approach is proving itself useful in meeting requirements set forth in its Transfer Pricing Guidelines.
In fact, tax authorities around the globe to varying degrees have begun to look to a VCA as part of the process to understand 鈥渢he big picture鈥� of the whole value chain of a business. In many ways, it provides necessary insights beyond what one would get from mere functional analysis as a result of its enhanced focus on people and specific activities. Indeed, it has become a more commonplace part of transfer pricing documentation as well as in the area of advanced pricing agreements (APAs) and controversy.
Notwithstanding the VCA鈥檚 recently raised profile, many people don鈥檛 fully understand what a VCA is or the many ways it has been, and continues to be, useful to tax practitioners.
In this paper, the authors from 乐鱼（Leyu）体育官网 LLP鈥檚 (乐鱼（Leyu）体育官网) Transfer Pricing and Value Chain Management practices:
- Consider what a VCA is
- Provide an overview as to how a VCA is performed
- Discuss some practical use cases to demonstrate how VCAs are already being used by taxpayers.
